Rural/Metro troubles

2006: Agreed to return more than $95,000 the company allegedly billed improperly for ambulance services in Maryland from 1997 to 2003. Also paid a $50,000 civil penalty and $30,000 for investigation costs to the state’s Consumer Protection Division.

2007: Paid a $2.5 million settlement as a result of two whistle-blower lawsuits that alleged the company violated anti-kickback laws by providing discounted rates to Texas hospitals in order to secure business.

2008: Paid more than $950,000 to settle allegations that the company filed false claims for Medicaid reimbursements in Washington, D.C. Federal investigators uncovered false billings between 1999 and 2002 that showed the some ambulance rides were not medically necessary, not authorized under Medicaid or never occurred.

2009: Tennessee Medicare administrators withheld $3 million from Rural/Metro, alleging the bills that the company submitted for fiscal 2008 were not reimbursable. Rural/Metro appealed and received $1.3 million.

2010: Federal investigators alleged the company had certain billing inaccuracies between 1997 and 2001 in Ohio that did not meet Medicare medical necessity and reimbursement requirements. Company has offered $2.4 million to settle.

Source: U.S. Department of Justice, Rural/Metro corporate filings, court records and published reports.

Rural/Metro Corp., the private firm that partners with the city of San Diego to provide ambulance service, has paid or offered to pay more than $6.5 million in settlements and fines over the past six years to resolve several allegations of improper billing and other wrongdoing around the country.

Such accusations have been levied in San Diego, where a whistle-blower says Rural/Metro shortchanged the city by as much as $12 million over a 10-year period. A report from independent City Auditor Eduardo Luna raised questions about a number of improper or unreasonable charges by the firm.

The city created a partnership with Rural/Metro in 1997, known as San Diego Medical Services Enterprise, to provide ambulance and paramedic service. The recent allegations have tarnished what has long been touted by local fire officials as a one-of-a-kind model for how a public-private partnership can work to save lives and taxpayer money.

San Diego Medical Services has 550 employees and more than 80 ambulances that respond to nearly 100,000 medical emergency calls in San Diego and other parts of the county, such as Del Mar, Encinitas and Solana Beach.

City Council President Tony Young said it was “really disconcerting” to hear the allegations in San Diego are similar to those in other locations.

“We’ll find out more as we go forward, but the good thing is that it was caught and that’s one of the reasons we have an independent auditor,” Young said. “We have a city attorney who’s determined to use the legal system to get the money back.”

A Rural/Metro spokeswoman declined to comment for this story, but the Scottsdale, Ariz., company’s general counsel previously denied any wrongdoing and said he is confident a review of finances will show the city received all of the money it was owed from the partnership.

In South Dakota, Texas and Washington, D.C., Rural/Metro paid large sums of money to settle allegations of improper billing and illegal kickbacks.

A review by The Watchdog of corporate filings, U.S. Department of Justice news releases and published reports found that Rural/Metro has paid or offered to pay more than $6.5 million to resolve various allegations since 2005. In addition, Tennessee Medicare administrators successfully withheld payment on about $1.7 million in billings from Rural/Metro it deemed inappropriate.

Many of the allegations stem from what Rural/Metro sought in reimbursements from Medicare and Medicaid for ambulance trips. The company was accused of offering kickbacks to hospitals in Texas.

Disputes over Medicare and Medicaid reimbursements are commonplace in the health care industry and Rural/Metro is one of several private ambulance companies that have paid cash settlements in response to billing questions.

Rural/Metro typically settles disputes without acknowledging any wrongdoing. The company has proposed a settlement in Ohio over alleged billing inaccuracies that has yet to be formally approved.

“We do not agree with the allegations and believe that there are errors in the sampling methodology performed by the government,” the company reported in its annual filing with the Securities and Exchange Commission. “Although we continue to disagree with the government’s allegations, we are engaged in settlement negotiations with the government and have made a preliminary offer of $2.4 million in exchange for a full release relating to the government’s allegations.”

The San Diego situation is different by virtue of the city’s unique partnership with Rural/Metro. Rather than hiring the company as an outside contractor, the city teamed up with the firm to create San Diego Medical Services, a separate legal entity where the partners share revenue and expenses.

The city largely allowed Rural/Metro to control the partnership’s finances, an arrangement that immediately struck Luna, the city’s independent auditor, when he began auditing San Diego Medical Services last year.

“One of the first things we learned that was completely shocking to us was the very weak, almost nonexistent (city) controls over this relationship,” he said. “The city was essentially ignorant in all financial aspects of the relationship. ... So coming in the door we know there’s a heightened risk for revenues that may be owed to the city, may be underreported and expenses may be overstated, just given the financial nature of the relationship.”

The audit released Monday found that Rural/Metro had been collecting and keeping bad-debt collections off the partnership’s regular books rather than clearly identifying the revenue, half of which should have gone to the city. A former Rural/Metro executive, who filed a whistle-blower lawsuit, pegged the city’s lost revenue from 1997 to 2007 to be as much as $12 million.

In addition, Luna’s audit discovered that Rural/Metro withdrew about $5.8 million from the partnership’s account that was in excess of the expense reimbursements it was entitled to. The company also was charging the city twice the industry average for a “capital fee” on the partnership’s assets, an annual charge of about $1.6 million, and collecting a billing fee of $23.50 per ambulance trip, a figure on the high end of the industry average.

From the audit: “Rural/Metro was unable to provide timely and adequate evidence to substantiate all reimbursements made against SDMS accounts. Furthermore, in our professional opinion, much of the information we requested should be readily available to support expense reimbursements. However, Rural/Metro appeared to have difficulty in providing additional supporting documentation in a timely fashion due to the complex financial organizational structure.”

Mayor Jerry Sanders, whose administration is responsible for financial oversight of San Diego Medical Services, said he is “obviously concerned” with the findings and is working to fix the oversight issues.

“We’re negotiating with them right now to try to avoid a lawsuit and make sure we get paid everything that we’re due,” Sanders said. “The oversight has to change obviously ... You obviously look at a service that’s been a good service and try to fix the parts that aren’t.”

Rural/Metro has agreed to pay for an independent forensic accounting of the past 13 years of the partnership’s finances and put up a $7.5 million surety bond to secure any future city claim for money owed. The two sides are also negotiating on a new contract for the coming fiscal year, ahead of the city putting the ambulance service up for competitive bid in the near future.